The Red Canal: Uncertainties Surround Nicaragua’s New Project

TODAY NICARAGUA NEWS (Speigel Online) — Wearing orange overalls and sun hats, the Chinese arrived in Río Brito by helicopter before being escorted by soldiers to the river bank — right to the spot where José Enot Solís always throws out his fishing net. The Chinese drilled a hole into the ground, then another and another.

“They punched holes all over the shore,” the fisherman says. He points to a grapefruit-sized opening in the mud, over one meter deep. Next to it lie bits of paper bearing Chinese writing. Aside from that, though, there isn’t much else to see of the monumental and controversial project that is to be built here: The Interoceanic Grand Canal, a second shipping channel between the Atlantic and Pacific.

The waterway is to stretch from Río Brito on the Pacific coast to the mouth of the Punta Gorda river on the Caribbean coast. Beyond that, though, curiously little is known about the details of the project. Only Nicaraguan President Daniel Ortega and his closest advisors know how much money has already been invested, what will happen with the people living along the route and when the first construction workers from China arrive. Studies regarding the environmental and social impact of the undertaking don’t exist.

The timeline is tight. The first ship is scheduled to sail into Río Brito, which will become part of the canal, in just five years. When completed, the waterway will be 278 kilometers (173 miles) long, 230 meters (755 feet) wide and up to 30 meters (100 feet) deep, much larger than the Panama Canal to the south. A 500-meter wide security zone is planned for both sides of the waterway. And it will be able to handle enormous vessels belonging to the post-panamax category, some of which can carry more than 18,000 containers.

Thus far, only a few dozen Chinese experts are in Nicaragua and have been carrying out test drilling at the mouth of the river since the end of last year. They are measuring the speed at which the river flows, groundwater levels and soil properties. Not long ago, police established a checkpoint at the site and it is possible that the entire area will ultimately be closed off.

For now, though, the region remains a paradise for natural scientists and surfers. Sea turtles lay their eggs on the beach and a tropical dry forest stretches out behind it to the south, reaching far beyond the border into Costa Rica. But if the river here is dredged and straightened out as planned, the village on Río Brito will cease to exist.

Manuel Coronel Kautz is head of Nicaragua’s Canal Authority. He is obsessed with the project. His grandfather, a German engineer from the Alsace, likewise dreamed of a waterway between the seas, coming to Nicaragua in 1856 to develop a blueprint for the country’s president.

No Answers

The project has created massive uncertainty for those who live here and ever since the arrival of the Chinese workers, they have been wondering when they will be resettled and how much the government will provide as compensation. Thus far, they haven’t received any answers. And they aren’t alone: A total of 30,000 people live close enough to the planned canal route that they will likely have to be resettled, but an exact number has yet to be announced.

Employees of a Chinese company are currently going door-to-door to collect details on residents and property. But with opposition to the project rising, they are accompanied by police and soldiers armed with Kalashnikovs. Thousands of locals along the route have begun protesting against their impending expropriations with several demonstrations having taken place in just the last few weeks. Many of the signs they carry read: “No Chinos!” The anger has become so intense that police have begun patrolling outside of the Chinese engineers’ headquarters in the provincial city of Tola.

Mónica López Baltodano is a specialist in environmental law and is among the leading opponents of the canal project. She has filed a constitutional complaint at the Inter-American Commission on Human Rights against the granting of the canal concession to a Chinese company.

But disdain for the project is not universal, leading to a growing split in the country. Many Nicaraguans welcome the Chinese investment and hope that the canal will bring in jobs and prosperity. Others fear a flood of Chinese immigrants.

Making matters worse is the raft of questions surrounding the project. At first glance, the geography looks ideal for the canal. Lake Nicaragua provides a natural waterway in the country’s interior, with just 20 kilometers separating the lake from the mouth of Río Brito. But breaking through to the Caribbean on the other side promises to be difficult. The area is swampy, hardly developed and populated by indigenous peoples. Thousands of square kilometers of forestland would have to be cleared.

It is also unclear if the undertaking will ever be profitable. The Panama Canal is currently being expanded and several other Central American countries are planning “dry canals” consisting of train lines connecting the two oceans across the isthmus. In order to be competitive against the others, the Nicaragua canal would have to transport a vast amount of freight. Furthermore, the small country has neither the money nor the know-how for a project of this magnitude.

Stranglehold on Power

None of these problems, however, seem to be of much concern for the president, hoping as he is that the canal will cement his legacy. But Ortega is far from the first to dream of such a thing. For 200 years now, the idea of a waterway connecting the two oceans has been one pursued by both Nicaraguan leaders and the country’s US occupiers. The Sandinista revolutionaries likewise expressed interest in the project for a time.

Ortega was one of the comandantes who led the 1979 Sandinista revolt against the dictatorship of Anastasio Somoza. In 1990, the Sandinistas were voted out of office, but Daniel Ortega returned to power in elections seven years ago. Since then, he and his family have established a stranglehold on power in the country. The opposition is divided and he faces little resistance in the country’s parliament. At the beginning of the year, Ortega pushed through a constitutional amendment allowing him to stand for re-election indefinitely. Critics accuse him of ruling the country like Somoza did, just without the torture.

The erstwhile socialist Ortega has cemented his power by making peace with the church and with the country’s business leaders. Furthermore, his Sandinistas have firm control of the Judiciary, Parliament and the Executive while Ortega’s children own several television channels. He is fond of presenting himself as a kind of Christian savior.

Ortega’s wife, Rosario Murillo, is the government spokeswoman, but in reality she has much more power than that. People in the country refer to the esoteric First Lady as “La Bruja,” the witch. In the capital Managua, she has installed gigantic steel trees covered with thousands of lights on important arterials. They are lit up throughout the year as though it were eternally Christmas — many of them are decorated with glowing stars, reindeer and Santas. She has also had several public buildings painted pink, her favorite color.

Because Nicaragua is unable to build the canal on its own, Ortega brought the Chinese on board as a partner. Ever since the revolution, the Sandinistas have had close relations with the Communist Party of China. Two years ago, the president sent his son Laureano to Beijing to explore the possibilities for economic cooperation.

Making Contacts

During a meeting with several Communist Party luminaries, Laureano Ortega was approached by businessman Wang Jing, who introduced himself as a representative of the telecommunications company Xinwei. The two became friends and Laureano invited Wang for a visit to Managua. The government granted him a license for the expansion of the telephone network, but ultimately revoked it because he proved unable to fulfill his pledges. Still, Wang’s company established branch offices in a pink-colored high-rise in Managua known as the “Freedom Building.”

It must have been during this period that the idea for the canal was developed and that Wang pledged $50 billion in financial backing. Where the money comes from remains unclear. Critics believe that the businessman is a straw man for the Chinese government. Latin America, after all, is strategically important for China, particularly when it comes to the country’s need for raw materials and foodstuffs. The canal would drastically increase Chinese influence on the continent and would likewise provide it with control over a key transit point for global trade, similar to the advantage the US once enjoyed when it controlled the Panama Canal.

In June 2013, Daniel Ortega and Wang Jing signed the canal construction agreement. It grants the Chinese a 50 year concession with the option to extend it for another half a century. To carry out the project, Wang founded the HKND Group, with headquarters in Hong Kong. Stakeholders, however, have been kept anonymous and the company belongs to a consortium that is registered in the Cayman Islands. The legal firm Wang hired to represent him in Managua provides no information about the company and Wang himself did not respond to repeated attempts to contact him.

The government commission responsible for the project — appointed by President Ortega — likewise keeps an oddly low profile. Its offices are in a yellow villa and there is no sign indicating the commission’s function. Police officers photograph passing cars through an observation slit.

Inside, the friendly Mr. Kautz is standing with his secretary. Manuel Coronel Kautz, 82, is president of the commission and a longtime companion of the president’s. He is a trained agricultural engineer specialized in animal husbandry, but he is obsessed by the canal. For years he has been arguing in favor of its construction and once even tried to talk a Dutch company into building it.

‘Dream Come True’

Fascination with the canal is something of a tradition in Kautz’s family. His grandfather, a German engineer from the Alsace, likewise dreamed of a waterway between the seas, coming to Nicaragua in 1856 to develop a blueprint for the country’s president. “I am now seeing his dream come true,” Kautz says. Critics, though, doubt that Kautz really has much say in the canal project. “Ortega is abusing the old man as a figurehead,” says Carlos Fernando Chamorro, a journalist and Ortega detractor.

Chamorro is particularly critical of the fact that the Nicaraguan people have never been consulted about the project even though the canal would drastically change the country. “The concession was handed out without input from the public,” he complains, adding that the Sandinistas pushed the required legal framework through parliament in just a few days. “They ignored constitutional guarantees and handed control over to the military. In reality, the project serves to launder money. A small clique is hoping to enrich itself,” Chamorro claims.

He isn’t alone with his theory. Attorney Mónica López Baltodano, a specialist in environmental law, agrees that something fishy is afoot. She is a leading opponent of the canal project and has filed a constitutional complaint against the concession at the Inter-American Commission on Human Rights. She spent months studying the 120-page long concession contract and has published her conclusions in book form.

“The concession violates fundamental rights. The government has sold us to the Chinese,” Baltodano says. “We are granting them rights to shipping and to our waterways. That is a violation of our sovereignty.” In addition, she adds, Lake Nicaragua, one of the country’s most important sources of drinking water, will be destroyed. But the country’s leaders appear unmoved by such arguments.

‘Too Many Inconsistencies’

Wang Jing has done his best to ensure that it remains so. One year ago, he invited a delegation of Nicaraguan business leaders to Beijing. During their visit, they were treated like state guests, complete with motorcycle escorts as they traveled through the city. Since then, they have all thrown their support behind the canal project.

Indeed, some companies are already preparing for a life once the canal is opened. The Pellas Group, Nicaragua’s most important business conglomerate, has built a luxury resort, complete with golf course and helipad, not far from the planned mouth of the canal on Río Brito. When Wang and Laureano Ortega come to see how work is progressing, that is where they stay. Multimillionaire Carlos Pellas has excellent contacts to the presidential family and is also hoping for some business from the Chinese.

In the end, though, the project’s largest hurdle could be the challenges of providing adequate provisions to the Chinese laborers. At the beginning of October, the canal construction firm HKND informed the government in Managua what they would need to feed their 50,000 workers, most of whom are apparently coming from China. The list includes 12.5 tons of meat, 37.5 tons of rice and 25 tons of vegetables. Each day. Not all of that can be supplied locally. Additional vegetables and rice would have to be imported.

“I don’t understand how you can announce the beginning of construction without knowing how the workers are going to be fed,” Baltodano says. She doubts that the canal will ever be completed. “There are simply too many inconsistencies.”

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